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Nasdaq rebalancing seen as a buying opportunity for Apple investors

post #1 of 27
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Apple will be negatively impacted by the decision to re-weight its stock on the Nasdaq-100 Index, but the company's fundamentals remain strong, presenting a buying opportunity for investors.

Analyst Brian White with Ticonderoga Securities said the announcement on Tuesday that the Nasdaq would rebalance AAPL stock from 20 percent to 12 percent of its index of the 100 largest nonfinancial stocks is just the latest in a series of headwinds for Apple's market performance. The rebalancing, he said, adds "more noise to a loud past few months."

"Despite strong demand for Apple's products and a very successful launch of the iPad 2, the stock has been battling headwinds such as today's rebalancing announcement, along with concerns regarding Japan, Steve Jobs' health, concerns regarding a delayed iPad 2 launch (this was proven false), the timing of the upcoming iPhone 5 launch and general market noise," White said.

He believes these concerns will eventually subside, allowing investors to again focus on the company's fundamentals. White believes the company's stock will reach new all-time highs as the year progresses, as products like the iPhone, iPad and Mac lineup continue to experience year over year growth.

Specifically, he believes that continued strong demand for the iPad 2 epitomizes Apple's current success. Demand for Apple products is predicted to be a "phenomenon" that will continue to bring earnings surprises over the next 12 to 18 months.

"We also believe the buzz surrounding the iPad 2 launch is also driving a further halo effect around Apple's existing portfolio as consumers are drawn into stores," he said.

Ticonderoga Securities has a 12-month price target of $550 for AAPL stock, and a recommended buy rating for investors.
post #2 of 27
If your horizon is at least a few years -- as it should be -- events like this are all noise around a longer-term trend.
post #3 of 27
Good thing I bought back when it was $15 per share. Gotta love Steve for that.
post #4 of 27
This is important information. Basically it means that AAPL's great stock price appreciation over the past few years caused it to assume a huge share of the S&P100. Obviously having 1 stock account for 20% of an index of 100 companies is a bit unbalanced. So they're reweighting it down to 12%. In practice, what this means is that the large number of index mutual funds that mirror the composition of the S&P100 will sell off nearly half their AAPL shares. That'll be a BIG sell-off and negatively affect the price of AAPL shares (in fact that might be what caused the big drop yesterday?). But as the analyst states, this is predictable and in no way statement of the market's displeasure with Apple, Inc.

Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.
post #5 of 27
No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..
post #6 of 27
Quote:
Originally Posted by malax View Post

Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.

Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.
post #7 of 27
Quote:
Originally Posted by malax View Post

This is important information. Basically it means that AAPL's great stock price appreciation over the past few years caused it to assume a huge share of the S&P100. Obviously having 1 stock account for 20% of an index of 100 companies is a bit unbalanced. So they're reweighting it down to 12%. In practice, what this means is that the large number of index mutual funds that mirror the composition of the S&P100 will sell off nearly half their AAPL shares. That'll be a BIG sell-off and negatively affect the price of AAPL shares (in fact that might be what caused the big drop yesterday?). But as the analyst states, this is predictable and in no way statement of the market's displeasure with Apple, Inc.

Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.

Anyone know when this sell off will kick in -- so far after opening around 336 the stock's hovering at 340.

Will managers sell off immediately or over the course of the month?
post #8 of 27
Quote:
Originally Posted by will2 View Post

Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.

The Dow Industrial Average is not a part of NYSE. It has both NYSE- and NASDAQ-listed companies.

http://en.wikipedia.org/wiki/Dow_Jon...age#Components
post #9 of 27
Quote:
Originally Posted by eh270 View Post

No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..

AI is a blog. Get over it.
post #10 of 27
Quote:
Originally Posted by JakeBarnes View Post

Anyone know when this sell off will kick in -- so far after opening around 336 the stock's hovering at 340.

Will managers sell off immediately or over the course of the month?

A managed fund would sell opportunistically, but a pure index fund would sell immediately. (Of course, they would likely sell to themselves if it presented a buying opportunity for another fund, so not all shares would be traded on the open market.

Institutional ownership is 66%, which is pretty flat over the last 5 years, despite the weighting on the NASDAQ. I doubt this will be a big hit; nothing compared to the impact of going in or out of the S&P 500.
post #11 of 27
Quote:
Originally Posted by will2 View Post

Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.

And you said you bought AAPL at $15? I call bullshit. You don't even know the dow jones index...how would anyone believe you. Dow jones has 30 components and not all on nyse. Idiot.
post #12 of 27
Quote:
Originally Posted by will2 View Post

Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.

The Dow Jones Industrial Index is 30 stocks, they also have a transportation index and there are other lists. The Industrials Index is the most followed number... The averages are not done to maximize the "top" stocks, but to give a barometer for the broader market, hence listing and delisting of new stocks over the years. GE is the only company on the original list that is still there today (see Dow Wiki).

Apple (who is only on the NASDAQ) at one point was offered to move to the NYSE and declined. I don't remember all the financial reasons why they declined at the time (I couldn't drum up a source, sorry).
post #13 of 27
Quote:
Originally Posted by Steveafb View Post

And you said you bought AAPL at $15? I call bullshit. You don't even know the dow jones index...how would anyone believe you. Dow jones has 30 components and not all on nyse. Idiot.

You don't have to know the f-ing index - or anything else as far as that goes. I bought at $18.50 (the second time) cause I had been kicking myself since 84 for not buying then . I made myself a promise that if it ever got close again I would buy. It slipped lower before it started rising but I held cause I was in long.

I call BS on you. Sounds like someone that has missed pulling the trigger more than once and is a little jealous of those of us that bought early and been in for the show!
post #14 of 27
Quote:
Originally Posted by eh270 View Post

No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..

Why? Do you think all journalist own stock in everything they report on? That would would be some wild stuff!
post #15 of 27
aapl has been a great cash cow for me the last 8 years. BUY HOLD sell a little--> buy a little---> book profits.. rinse and repeat.

If I had bigger cojones I would borrow against my house, grab up a hundred shares, and hold for 12 months. Even a 450 price target would be a sweet harvest. 550? Another mid-life crisis sports car!
post #16 of 27
Quote:
Originally Posted by Damn_Its_Hot View Post

You don't have to know the f-ing index - or anything else as far as that goes. I bought at $18.50 (the second time) cause I had been kicking myself since 84 for not buying then . I made myself a promise that if it ever got close again I would buy. It slipped lower before it started rising but I held cause I was in long.

I call BS on you. Sounds like someone that has missed pulling the trigger more than once and is a little jealous of those of us that bought early and been in for the show!

You want to bet? I have the data to prove I bought even before you $18.5.

I was pointing out that he was so ignorant that he doesn't know what the Dow Jones is about, makes me wonder how he figured out to buy stocks...
post #17 of 27
Well another big hit to AAPL stock today, is it justified? I admit I do not have a deep understanding of what percentage of AAPL shares are influenced by the NASDAQ 100, but as a small investor in AAPL I've made an attempt to see who will be forced to sell AAPL to comply with the Index chage from 20% to 12%. The one sure fund is the Powershares QQQ trust which as of April 4, 2011 owned 14.94 million AAPL shares with a value of 5.28 billion dollars. My understanding is they will need to release 40% of their AAPL shares by May 1 to get to 12% of the indeq. That would be 5.98 million shares out of the total of 921.28 million total AAPL shares. The percenatge that QQQ will need to sell as a percentage of all AAPL shares is a little less then .6% (notice the decimel point) and of course they can parcel that out a little at at a time throughout April. APPL quarterly report will come out April 16th and with another homerun earnings report should have a larger effect on AAPL then the NASDAQ 100 modification. Of course their may be other funds under contract to tract the NASDAQ 100 I just don't know what influence they have, I just know that QQQ is the biggest and most well known. Most mutual funds and investment banks set their own criteria of holdings and are under no obligation to tract the NASDAQ 100.
post #18 of 27
God analyist speak makes me want to vomit. I hope no one actually puts and faith in what Brian White says.

One thing for people to realize is that ETFs of indexes are managed and arbitraged to mirror the index. They don't actually have to own an exact percentage of shares for everything in the index the just need to match the performance of the index and use optiOns and other financial instruments to achieve that. The really winners in this rebalancing act are the fund mangers that play it right.
post #19 of 27
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post #20 of 27
Quote:
Originally Posted by eh270 View Post

No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..

AppleInsider is not a subsidiary of Apple Inc. Professional news organizations provide such footnotes due to conflict of interest because they are reporting on their parent company.
post #21 of 27
Quote:
Originally Posted by Steveafb View Post

And you said you bought AAPL at $15? I call bullshit. You don't even know the dow jones index...how would anyone believe you. Dow jones has 30 components and not all on nyse. Idiot.

I bought $10,000 worth on Feb. 7, 1997 for $16.50 a share. Sold that block at about $202 a share last year to pay for a major remodel of my house. I have a smaller block that I bought for $60 a share in April 2006. God bless you, Steve.

P.S. I'm not a rich guy or a market guru, just a regular guy who got lucky. I had faith in Apple when all others were calling it dead.
A.k.a. AppleHead on other forums.
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A.k.a. AppleHead on other forums.
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post #22 of 27
It might be time to cash in a little guys, but until apple looses its huge technical support and public hype, AAPL will be a leader stock. However, when people like Reggie Middleton start talking about shorting AAPL, I get a little nervous. Do you want to be on the other side of his trade?

http://boombustblog.com/boombustblog...hort-on-apple/

BTW, I think he is totally underestimating iOS when comparing to Android.
post #23 of 27
Move over Gene Munster there's a new kid on the block!....Brian White.
Perhaps Mr White would be well advised in looking over Munsters track record, predictions ,and rumor mill before standing in line for next years April Fool Award.
In any case I'm sure Brian White will provide many moments of entertainment and laughs for those following and reading his analysis.
My only question is what is Brian White basing his opinion on when Apple is known to be closed lip.
post #24 of 27
There's a piece today in BusinessWeek about NASDAQ rebalancing
the stocks in the index due to changes in share price.

The interesting snippet is what has happened since 21 Dec 1998
when certain rule changes came into effect.

Apple +3,779%
Microsoft -26%
Cisco -25%
Intel -35%
Dell -58%
post #25 of 27
Quote:
Originally Posted by JakeBarnes View Post

Anyone know when this sell off will kick in -- so far after opening around 336 the stock's hovering at 340.

Will managers sell off immediately or over the course of the month?

This article from the WSJ says that the trading will likely happen at the end of the month. http://online.wsj.com/article/SB1000...o&mod=yahoo_hs

It also says that the sell off from ETF's will amount about 1% of AAPL or half a normal day of trading. They don't think it will have much of an impact. However, with all the hedge funds that will be trying to game this trade, there is likely to be quite a bit of volatility in the stock.
post #26 of 27
Quote:
Originally Posted by BetaBee View Post

It might be time to cash in a little guys, but until apple looses its huge technical support and public hype, AAPL will be a leader stock. However, when people like Reggie Middleton start talking about shorting AAPL, I get a little nervous. Do you want to be on the other side of his trade?

http://boombustblog.com/boombustblog...hort-on-apple/

BTW, I think he is totally underestimating iOS when comparing to Android.

The Bloomberg article has quotes from people hoping for a big collapse in Apple, saying the rebalancing will reduce its effect. Instead, Apple probably keep the index *higher* while Very Little Soft and Cisco were declining.

Oh, and on the stock purchase price wars, the "data" you want is not some funny number you have in a spreadsheet, but the trade confirmations from your broker. Two I have handy are on 4/14/03 at $13.71 (one 2 for 1 split adjusts to $6.855) and on 11/29/85 at $20.125 (three 2 for 1 split adjusts to $2.515625).

FYI, at the Apple Shareholder's meeting this year, I remarked to one of the young security people that I probably owned Apple, Inc. stock longer than he has been around. When I gave him the year, he said I was right...

Sigh, off to go find the cost basis for some *other* shares my wife sold last year. Neither of those two are the basis for those shares. The 2003 shares are in my IRA and the 1985 shares are in my daughters' accounts.
post #27 of 27
Quote:
Originally Posted by lukevaxhacker View Post

The Bloomberg article has quotes from people hoping for a big collapse in Apple, saying the rebalancing will reduce its effect. Instead, Apple probably keep the index *higher* while Very Little Soft and Cisco were declining.

Not happening. AAPL has underperformed the NASDAQ over the last six months. Good luck finding another six month period in the last ten years when that's happened. Forward P/E is now at something like 12. That just sucks.
Please don't be insane.
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Please don't be insane.
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